State Universities Retirement System Compliance Audit 2000

REPORT DIGEST

STATE UNIVERSITIES RETIREMENT SYSTEM

COMPLIANCE AUDIT

For the Year Ended:

June 30, 2000

Summary of Findings:

Total this audit 3

Total last audit 6

Repeated from last audit 2

Release Date:
February 14, 2001

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

Quality control procedures over benefit payments should be enhanced to help reduce the number of errors in benefit calculations.

{Financial Information and Activity Measures are summarized on the reverse page.}

STATE UNIVERSITIES RETIREMENT SYSTEM

INFORMATION FROM FINANCIAL AND COMPLIANCE AUDITS

Two Years Ended June 30, 2000

FINANCIAL OPERATIONS	FY 2000	FY 1999
Additions Contributions Participants Employer Total Contributions Investment Income Net appreciation in fair market value Interest Dividends Other Less: Investment expense Total Investment Income Total Additions Deductions Total benefits Other expenses Total Deductions Net Increase	$238,013,504 255,838,989 $493,852,493 $1,293,250,121 162,986,834 59,163,434 2,544,765 16,607,717 $1,501,337,437 $1,995,189,930 $590,219,130 60,637,895 $650,857,025 $1,344,332,905	$219,675,072 244,307,504 $463,982,576 $924,335,988 135,613,846 57,071,338 1,778,173 14,249,419 $1,104,549,926 $1,568,532,502 $525,966,160 43,215,106 $569,181,266 $999,351,236
INVESTMENT PORTFOLIO ANALYSIS (Fair Market Value)	JUNE 30, 2000	JUNE 30, 1999
Total equities Total fixed income securities Cash and short-term investments Real estate investments Self-Managed Plan Funds Accrued investment income Total Investments at Fair Market Value	$8,621,122,481 3,511,229,394 491,175,635 6,905,654 67,244,728 30,998,993 $12,728,676,885	$7,680,799,360 2,964,729,349 319,260,567 59,883,071 29,438,232 20,968,780 $11,075,079,359
ADMINISTRATIVE EXPENSES	FY 2000	FY 1999
Personal services and benefits Other professional fees and services Depreciation Postage Printing and copying services Building operations expenses Self-managed plan Other expenses Total Administrative Expenses	$5,493,374 2,094,569 1,361,308 448,429 319,368 207,280 437,692 539,861 $10,901,881	$4,861,317 1,563,812 1,373,103 458,952 332,474 175,111 640,728 585,725 $9,991,222
SELECTED ACCOUNT BALANCES	JUNE 30, 2000	JUNE 30, 1999
Investments at Market Value Securities lending collateral Cash & short term investments Pending investment sales Accrued investment income receivable Other assets Total assets Securities lending collateral Payable to brokers for unsettled trades Other payables Total liabilities Net assets held in trust for pension benefits	$12,206,502,255 705,947,077 491,175,634 619,180,121 30,991,993 25,642,586 $14,079,439,666 $705,947,077 1,200,600,257 35,530,309 $1,942,077,643 $12,137,362,023	$10,734,850,012 651,738,947 319,260,567 121,072,974 20,968,780 29,427,851 $11,877,319,131 $651,738,947 399,280,115 33,270,951 $1,084,290,013 $10,793,029,118
SUPPLEMENTARY INFORMATION	FY 2000	FY 1999
Total investment administrative expenses Return on investments (unaudited) Average number of employees Number of active members Number of inactive members Number of retirement benefit recipients Number of survivors benefit recipients Number of disabilities benefit recipients	$16,607,717 14.0% 106 77,770 45,382 24,087 5,500 833	$14,249,420 11.5% 95 78,406 41,814 22,652 5,374 1,255
EXECUTIVE DIRECTOR During Audit Period and Currently: Mr. James M. Hacking

Errors in benefit calculations result in incorrect payments to participants

INTRODUCTION

This digest covers our compliance audit of the State Universities Retirement System (SURS) for the year ended June 30, 2000. A financial audit covering the year ending June 30, 2000 is being issued separately.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

QUALITY CONTROL OVER BENEFIT CALCULATIONS

Quality control procedures over benefit payments should be enhanced to help reduce the overall number of errors in benefit calculations. Our testing of retirement benefits identified one incorrect calculation and the SURS Internal Audits' reviews documented multiple errors in calculations. Such errors result in either overpayment or underpayment of retirement benefits to a plan participant.

SURS has formal policies and procedures in place to review the benefit calculations and resolve discrepancies prior to the benefit being paid. However, there is still a risk that these reviews will not be effective at all times due to turnover of personnel, lack of experience, complexity of the calculations, and breakdowns of manual controls due to human error. (Finding 1, pages 9-10)

SURS officials agreed with our recommendation and stated they plan to implement a quality control work plan that will define the scope of work, testing procedures and steps that need to be followed to ensure compliance with laws and regulations over benefit and refund processing.

OTHER FINDINGS

The remaining findings are less significant, and SURS’ responses indicate it is addressing the conditions. We will review progress toward implementing these recommendations in our next audit.

Mr. Steve Hayward, Internal Auditor at SURS provided responses to our recommendations.

____________________________________

WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Arthur Andersen LLP were our special assistant auditors for this audit.